W. Va. Code R. § 110-21-40

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-40 - Credit For Income Tax Of State Of Residence

40.1. General. - A nonresident individual, who has income derived from West Virginia sources, shall be allowed a credit against his West Virginia personal income tax imposed on his West Virginia income for any income tax imposed by another state of the United States or by the District of Columbia of which the taxpayer is a resident where there exists between West Virginia and the nonresident's state of residence a written reciprocal credit agreement authorized under W. Va. Code '11-21-40(c).

40.1.1. If a nonresident estate or trust is in receipt of income derived from West Virginia sources, then the estate or trust is entitled to a similar credit computed in the same manner and subject to the same limitations and exceptions as in the case of a nonresident individual.

40.1.2. No credit shall be allowed for personal income taxes imposed by a county, borough, township, or any other political subdivision of a state.

40.1.3. The amount of the credit allowed under W. Va. Code '11-21-40 and this regulation shall be determined in accordance with forms and instructions provided by the Tax Commissioner.

40.1.3.1. The Tax Commissioner may by instruction or otherwise require any nonresident individual, estate or trust to provide evidence, including but not limited to, a copy of the completed and signed resident income tax return filed with the other taxing jurisdiction for the taxable year, in order to establish that the individual, estate or trust is entitled to claim a credit under the provisions of W. Va. Code '11-21-40.

40.1.4. Where the provisions of W. Va. Code '11-21-41 and Section 41 of these regulations are applicable a nonresident will not be required to file an income tax return with West Virginia for the taxable year.

40.2. Limitations. - The amount of the credit for any taxable year is subject to the following limitations:

(1) The credit allowed shall not exceed the amount of tax actually payable to the other state or the District on income also subject to West Virginia tax.

(2) The credit shall not exceed the percentage of the other tax determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other state or the District by the total amount of the taxpayer's income subject to such other tax. If, for example, the total income subject to such other tax was five thousand dollars ($5,000) and two thousand (2,000) thereof was derived from West Virginia sources, the amount of the credit would be limited to forty percent (40%) ($2,000 divided by $5,000 of such other state's tax).

(3) The credit shall not exceed the percentage of the West Virginia tax otherwise due, determined by dividing the portion of the taxpayer's West Virginia income subject to taxation in such other state or the District by the total amount of the taxpayer's income subject to West Virginia tax. If, for example, the taxpayer's West Virginia income subject to such other tax was eighteen thousand dollars ($18,000) and the total amount of the taxpayer's income subject to West Virginia tax was twenty-thousand dollars ($20,000), the amount of the West Virginia credit would be limited to ninety percent (90%) (18,000 divided by 20,000) of the West Virginia tax.

40.3. Definitions. - For purposes of W. Va. Code '11-21-40 and this regulation, the terms and phrases set forth below shall have the following meaning.

40.3.1. "West Virginia income" means the West Virginia adjusted gross income of a nonresident individual or the income derived from West Virginia sources by a nonresident estate or trust determined in accordance with the applicable rules of W. Va. Code '11-21-32 as in the case of a nonresident individual.

40.3.2. "West Virginia tax" means the total tax payable on the West Virginia taxable income of the nonresident under the West Virginia Personal Income Tax Act excluding any amounts representing penalties or interest.

40.3.3. "Tax of the other state or the District" means the total tax imposed for the taxable year exclusive of any penalty or interest.

40.3.4. "Income derived from sources within this State" means compensation for services performed in West Virginia, income from a business, trade or profession carried on within this State and income from the ownership of real or tangible personal property situated here but not income from intangibles, except where such income is from property employed in a business, trade or profession carried on in West Virginia.

W. Va. Code R. § 110-21-40